Boston, MA (PRWEB) August 31, 2004
Online banking adoption is growing at more than 35 percent a year across all market segments including basic online access, Electronic Bill Presentment and Payment (EBPP) and Account Aggregation. At the same time, the growth in the number of online adults is slowing as America approaches 80 percent saturation. The market for online banking will become more competitive over the next four years and the ultimate market crunch is closer than assumed for the unprepared. The online banking market will go through additional consolidation and online services must be more carefully designed to meet the needs of specific target customers.
The prime target of financial institutions will be the complex consumer, a segment that represents between 30 and 40 percent of Internet users. A complex consumer is affluent and online with multiple financial institutions. Because the complex consumer is one of the most profitable for financial institutions, institutions should learn how to lock up this consumer segment as quickly as possible.
Tim Sloane, director for the Debit Advisory Service for Mercator Advisory Group and author of the report, suggests that financial institutions must develop a new way of looking at the market. "Complex consumers have income deposited across multiple financial institutions and each family member is likely performing online functions at the financial institutions they favor. Identifying these multi-banked consumers is the critical first step in establishing a program that will better capture the financial bandwidth of these profitable consumers. Providing services that satisfy the financial needs of these complex consumers is also critical, and this starts with account-to-account transfers and EBPP. Financial institutions that limit the complex consumer's fluidity by resisting A2A solutions are in danger of being fluid in only one direction - out. Relative to EBPP, current solutions need to be enhanced to make the process of selecting billers easier, and aggregation will be an important tool by which the financial institution can better understand its position relative to all of the financial activities the complex consumer is involved in."
The report is 31 pages and contains five exhibits. Its highlights are:
1. A radical shift will occur in Online Banking over the next four years as the market for basic online banking services becomes saturated and the remaining online adults require more sophisticated banking services. A market crunch is closer than assumed for the unprepared.
2. Between 30 to 40 percent of Internet users are complex consumers. A complex consumer is affluent and online with income deposited in multiple financial institutions. Each complex consumer has a unique attitude regarding trust, privacy, control, security, risk, obligation, planning, constraints and valued relationships.
3. Consumer satisfaction with online banking should not be measured by usage or bank profitability. A good solution reduces effort, increases consumer profitability and delivers a trusted environment across the userÂs full range of financial activities as compared to alternative services.
4. A secondary inhibitor to EBPP adoption is a lack of a single-trusted third party to assist in dispute resolution. Consumers feel protected from fraud, billing errors and even shoddy merchandise when a credit card is used for the purchase. The EBPP solution that offers a similar degree of consumer protection will attract consumer participation.
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